Original author: Mary Liu, BitpushNews

Binance’s legal tug-of-war with U.S. regulators is escalating, with the SEC lashing out at Binance.US in its latest court filing, calling it uncooperative.

Documents submitted to the court on Monday showed that the U.S. Securities and Exchange Commission (SEC) asked the court to investigate Binance.US assets, accusing the other party of failing to fully comply with requirements to submit documents and other information related to the custody and control of customers’ crypto assets.

BAM Trading, the entity behind Binance US, said it was unable to provide this information.

Lawyers for BAM Trading said in the filing that the SECs filing requirements were overly broad and caused too much inconvenience to the exchanges execution. BAM objects to the SECs demands because they are vague, ambiguous, overbroad, lack specificity, or are oppressive, BAMs attorneys wrote.

The SEC previously required BAM to provide a series of documents, including the companys records of handling customer assets, proof of the companys reserves, a statement of overall financial status, etc. The regulator said these requests were deliberately ignored by Binance.

Binance.US’s relationship with Ceffu?

One of the SEC’s requests related to the exchange’s alleged use of a custody service called Ceffu to transfer U.S. customers’ funds abroad. In other words, is Binance.US a customer of crypto custody provider Ceffu?

The SEC, concerned about allowing foreign entities to control the assets of U.S. customers, said in court documents: Binance provided inconsistent representations of key facts, was slow to produce a small set of documents and information, and cast doubt on an entire class of Information was blocked that could expose unreliable vulnerabilities regarding its custody of client assets.

Additionally, the SEC emphasized the urgency of expediting discovery given the changes in Binance.US personnel, including its president, believing they may hold important information regarding the custody and availability of assets.

However, BAMs lawyers responded that the requirements were unduly onerous and forced BAM to incur substantial costs. In addition, the lawyers argued that some documents were either not in the hands of the exchange or did not fall within the scope of the SEC investigation.

Companies under investigation by federal agencies often deny requests for information on the grounds that the information is too broad or burdensome for their employees. And, while postponement is not always successful, it can cause significant delays in the case.

Not a Binance entity

Bitui previously reported that Ceffu was launched in December 2021, initially named Binance Custody, and renamed Ceffu in February 2023.

In documents filed in August and unsealed in September, the SEC said that Binance.US’s use of Ceffu may have violated previous legal agreements designed to ensure that only local users in the United States had access to funds. The agreement prohibits Binance.US from using any other entity associated with Binance or Changpeng Zhao for custody, but it can use third-party providers based in the United States.

Binance.US said in a legal filing on September 12 that the SEC’s concerns were “much ado about nothing” because wallet providers have no control over customer funds and that Ceffu is simply the marketing name for wallet hosting software developed by Binance Holdings and subsequently licensed to the U.S. department. .

Ceffu said in a post on Friday that it excludes the United States from its operations and “strongly disputes” the SEC’s assertion that it provides third-party “wallet escrow software and support services” to Binance.US.

vague information

According to information published by the Binance website, Ceffu is known as Bifinity UAB. Bifinity’s registration in Lithuania (which allows it to provide cryptocurrency trading and wallet services) is still listed on the Binance website and is listed among the various regulations Binance has obtained. under the license.

In November 2022, an SEC filing stated that Binance CEO Changpeng Zhao was the sole shareholder of Bifinity and said that two of Bifinity’s three board members also work for Binance. An SEC filing in June said the company is ultimately still owned by Zhao, so there remains confusion about Ceffu’s relationship with Binance.

Binance.US trading volume is evaporating

Trading volume on Binance.US is evaporating as Binance’s battle with U.S. regulators intensifies.

Data from CCData shows that in August, Binance.US’s monthly trading volume dropped 98% from January 2022, to just over US$286 million. From early September to September 15, Binance.US’s trading volume was US$115.7 million, so , the platform’s trading volume is likely to decline further in September.

As of Monday, daily trading volume on Binance.US was about $10.5 million, according to data tracking firm CoinGecko. By comparison, Coinbase Global Inc., the largest U.S. cryptocurrency exchange, has a daily trading volume of $948 million.

Most of the decline has occurred since March, when Binance was hit by accusations from the U.S. Commodity Futures Trading Commission (CFTC). Then in June, the SEC sued Binance.US, Binance, and Changpeng Zhao, accusing them of a series of violations, including distorting transaction controls and supervision on the Binance.US platform.

Under the regulatory haze, many banking partners have cut ties with Binance.US, and Binance.US management has also undergone considerable changes. Binance.US CEO Brian Shroder resigned last week, when the company fired three one of the employees.

Regarding the document dispute, U.S. District Court Judge Zia Faruqui of the District of Columbia encouraged Binance.US and the SEC to cooperate during the hearing. Faruqui said: I need all of you to work hard to deescalate the dispute, forget the past, and try to provide me with something that you think can be resolved. The problem.

The judge said Binance needed to provide more information about its current custody solution: I think we need more than what we have now, adding that he was not very confident that BAM has full control of its assets. .

If the court grants the SEC’s motion to compel at an October hearing, it will lead to greater scrutiny of Binance’s operations and potential violations of securities laws. Binance may have to disclose sensitive information, including documents related to its wallet hosting software and its relationships with entities such as Binance Holdings Ltd. (BHL), and violations discovered during the investigation may result in penalties, fines and further legal action. .